As Analyst Says ‘Buy’… Facebook Starts Facing Short Sellers

Facebook, Inc. (NASDAQ: FB) is a story that is frankly becoming the most over-covered story of internet IPO history.  The valuation of $100 billion at the launch now looks a bit silly even if Needham has issued a Buy rating with a $40 price target this morning.  The stock’s pressure since the initial public offering has for the most part existed without any short sellers. Until now….

Short sellers have been reported as being able to find some shares to borrow as early as Tuesday, a day or two before the first wave of traditional short sellers were supposed to be able to find stock to borrow.  It generally takes three trading days.  Generally.  In many cases it can take as long as two weeks before short sellers can find any shares.

As an indication that short selling has already begun, Dow Jones has a note this morning that short sellers borrowed about 13 million shares on Tuesday and the source was Sungard.  This is supposedly ahead of having to pay the high cost to borrow.

As far as the rest of the street is concerned, borrowing shares to short sell Facebook is likely to happen throughout the rest of the week and even next week after the options start to trade on Facebook.

Facebook shares are trading up 1.7% at $31.55 this morning ahead of the opening bell.  As a reminder, $38.00 was the IPO price and all those sellers who were hitting the ‘market sell’ orders this week were investors who were allocated shares at the IPO and those investors who chased the stock at a premium after it opened when NASDAQ’s order system was botched.

JON C. OGG